Registered holder: Overview, definition, and example
What is a registered holder?
A registered holder refers to the individual or entity whose name is officially recorded as the owner of a security, such as a stock, bond, or other financial instrument, in the records maintained by the issuer or its agent (e.g., a registrar or transfer agent). The registered holder has legal rights to the security, including receiving dividends, voting, or interest payments.
For example, if an individual buys shares in a company, their name is entered into the company’s shareholder registry, making them the registered holder of those shares.
Why is a registered holder important?
A registered holder is important because it establishes the legal owner of a security and ensures that rights, such as payments or voting privileges, are directed to the correct individual or entity. It also provides clarity and reduces the risk of disputes over ownership.
For issuers, maintaining a record of registered holders ensures compliance with corporate governance and regulatory requirements. For holders, it guarantees recognition of their ownership rights and facilitates smooth transactions, such as transfers or redemptions.
Understanding registered holder through an example
Imagine a person purchases corporate bonds through their brokerage account. The brokerage firm acts as a custodian, while the individual’s name is entered as the registered holder in the bond issuer’s records. As the registered holder, the individual is entitled to receive interest payments directly from the issuer.
In another example, a mutual fund investor buys shares. The fund records the investor’s name in its registry as the registered holder, enabling the investor to receive dividends and updates about fund performance.
An example of a registered holder clause
Here’s how a registered holder clause might appear in an agreement:
“The Company shall treat the person whose name is registered in its official records as the legal and registered holder of the securities for all purposes, including the payment of dividends, interest, and voting rights. The Company shall not be bound by any trust or other arrangement affecting the ownership of securities unless expressly recorded in the Company’s registry.”
Conclusion
A registered holder is the legally recognized owner of a security, providing them with rights such as payments, voting privileges, and ownership recognition. For issuers, maintaining accurate records of registered holders ensures compliance and proper administration of securities. For holders, registration guarantees their rights are protected and facilitates transactions or changes in ownership. Clear provisions regarding registered holders in agreements ensure transparency and minimize disputes related to ownership.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.